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Sipp claims soar faster than FSCS expected

Sipp claims soar faster than FSCS expected

The Financial Services Compensation Scheme has said the scale of self-invested personal pension scheme claims grew faster than it expected.

Mark Neale, chief executive of the FSCS, used Sipps as an example of how the scheme’s forecasts don’t always turn out as expected.

He said: “In 2016 to 2017 we faced two big insurance failures – of the Enterprise and Gable Insurance companies – of which we had little forewarning.

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“These costs - £41m for Enterprise and nearly £9m for Gable - were simply not in our numbers when the year began.

“Other trends accelerate more quickly than we expect. That was true of Sipp-related claims.

“The number of claims against advisers for mis-selling unsuitable pension investments picked up during 2016 to 2017.

“We expected to pay £95m in compensation, but in fact had to meet claims with value of £105m.”

The compensation paid by the FSCS to investors holding their pensions in Sipps went up by 35 per cent in 2016 to 2017.

Mr Neale also pointed out that claims can jump because of the actions of a single firm.

This happened last year when mortgage advice claims suddenly leapt because of mis-selling by Fuel Investments Ltd.

As a result of these unforeseen developments, the FSCS had to raise supplementary levies of £114m to meet its higher costs.

But it was also to return £50m to investment advisers where claims undershot its forecasts.

In total claims paid out by the FSCS rose to £375m for 2016 to 2017 according to its annual report, published earlier this month.